Is Lying OK? Apparently it is when you sell real estate in Wisconsin

From the moment we begin to learn, one common theme is drummed into our minds—it is wrong to lie. Many of us vividly remember what happened when we lied to our parents!

We especially don’t like it when someone lies to us to sell a product. This is especially true when buying a home. For most Wisconsinites, it is the single most valuable possession they will ever buy. This is why the state Supreme Court decision last month in Below v. Norton was so shocking. In a 4-to-3 decision, the court limited the punishment for homeowners who lie about the condition of their home.

For over a century, this state has allowed injured homeowners to pursue fraudulent misrepresentation claims in tort against homeowners who lied about the condition of their homes. Now the high court says that claim no longer exists.

Chief Justice Shirley Abrahamson, and Justices Louis Butler and Ann Walsh Bradley did not agree with the decision and for good reason. Writing for the dissent, Bradley put it very clearly:

“According to the majority, a person selling a home can look the buyer in the eye, lie about the condition of the home and escape legal consequences in tort for the lie because of the economic loss doctrine.”

The economic loss doctrine was created by judges to prevent parties to a contract from pursuing a recovery in tort when the damages suffered were economic or commercial losses. It was thought to be a private matter between the buyer and the seller and the contract should control how the dispute is resolved. With the court’s decision, this very narrow doctrine has now been expanded to prevent a private homebuyer from seeking remedies against a seller who lies to him.

The basic underlying purpose of tort law is to require each of us to act as a reasonable person to prevent harm to another. When a person lies, he violates this basic duty each of us owes one another. That is why the tort of fraudulent misrepresentation was created, to find a remedy for a serious wrong against community values.

This split decision of the Wisconsin Supreme Court is important for a number of reasons. For the first time, many victims of real estate fraud will go without remedies against the seller.

The decision also signals a dangerous turn for the court.

As Justice Bradley wrote in her dissent, good public policy that recognizes the need for truth in human relationships is no longer recognized by the Wisconsin Supreme Court.

This decision is bad for the welfare of Wisconsin consumers and bad for the real estate market, which must operate in an environment of trust and honesty.

We must ask, is this the direction some members of Wisconsin Supreme Court will take in the future? Much is at stake. We all need to be much more vigilant, not only as purchasers of homes but as voters in the next Wisconsin Supreme Court election.